to the methods of activity of state capitalism—did it prove sufficient for us to halt our retreat and begin preparing for an offensive? No, it proved still insufficient. And here is why. If we return to the comparison I made at the beginning (regarding the assault and siege in war), we have still not completed the new repositioning of troops, the redistribution of material units, and so forth—in short, we have not completed the preparation of new operations which now, in accordance with a new strategy and tactics, must proceed differently. If we are now undergoing a transition to state capitalism, then the question arises: must we strive to ensure that the methods of activity corresponding to the previous economic policy do not now hinder us? This is self-evident—and our experience has shown us this—we must strive for this. In spring we said that we would not fear a return to state capitalism, and we spoke of our tasks precisely as the formalization of commodity exchange. An entire series of decrees and resolutions, an enormous quantity of articles, all our agitation, all our legislation from spring 1921 onward was adapted to the promotion of commodity exchange. What was contained in this concept? What was, if one may so express it, the presumed plan of construction embodied in this concept? It was presumed that we would exchange, more or less in a socialist manner, throughout the entire state the products of industry for the products of agriculture, and by means of this commodity exchange restore large-scale industry as the sole foundation of socialist organization. What then turned out? It turned out—and you all now know this perfectly well from practice, but it is evident also from all our press—that commodity exchange collapsed: it collapsed in the sense that it transformed into buying and selling. And we are now compelled to acknowledge this, if we do not wish to bury our heads in the sand, if we do not wish to pretend to be people who do not see their own defeat, if we are not afraid to look straight in the face of danger. We must acknowledge that the retreat proved insufficient, that it is necessary to carry out an additional retreat, another step backward, when from state capitalism we transition to the creation of state regulation of buying and selling and monetary circulation. With commodity exchange, nothing came of it; the private market proved stronger than us, and instead of commodity exchange, we got ordinary buying and selling, trade.

Make the effort to adapt yourselves to it, otherwise the elemental force of buying and selling, of monetary circulation, will sweep you away!

This is why we find ourselves in the position of people who are still forced to retreat in order subsequently to finally transition to the offensive. This is why at the present moment the consciousness that the old methods of economic policy were mistaken must be universally recognized among us. We must know this in order to give ourselves a clear account of what the crux of the situation is now, what is peculiar about this transition which confronts us. External tasks do not confront us at this moment as urgent. Military tasks do not confront us as urgent either. What confronts us now, chiefly, are economic tasks, and we must remember that the immediate transition cannot be a direct transition to socialist construction.

With our economic affairs we were not yet able to cope in the course of three years. Given the degree of devastation, poverty, and cultural backwardness that we had, it proved impossible to solve this task in such a brief period. But the assault as a whole did not pass without trace and without benefit.

Now we find ourselves in conditions where we must withdraw yet a little further back, not only to state capitalism, but also to state regulation of trade and monetary circulation. Only by such a path, even more prolonged than we had anticipated, can we restore economic life. The restoration of a proper system of economic relations, the restoration of small peasant farming, the restoration and placing upon its own feet of large-scale industry. Without this we will not extricate ourselves from the crisis. There is no other way out; and meanwhile, the consciousness of the necessity of this economic policy among us is still not sufficiently clear. When, for example, one speaks—

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